Customer trust a global issue for banks
Wednesday, 2 March 2011 — Despite efforts by many banks to rebuild consumer confidence in the wake of the financial crisis, trust in banks fell in the past 12 months in countries hit hard by the downturn, according to a new report from EY. By contrast, banks in some regions relatively unaffected by the crisis are seeing trust levels rise.
For its new report, A New Era of Customer Expectation, EY surveyed more than 20,500 retail banking customers across Europe, the US, Canada, Latin America, India, Japan, China and South Africa to gauge what drives their relationships with their banks. The survey finds that 44% of customers worldwide say their confidence in the banking industry has decreased in the past 12 months.
“These findings should resonate with the local banking sector, where a new level of competition has been generated by the financial crisis, driving a refresh of the retail banking strategy across the sector, ” says Tim Coyne, EY’s Oceania Banking and Capital Markets Leader.
Levels of confidence are low in regions deeply affected by the financial crisis. In the US, 55% of customers now have less confidence in banks than they did a year ago. Within Europe, the UK has seen the largest drop in consumer trust (63%). Alternatively, in some markets which entered the downturn in better condition, confidence in the banking sector has grown in the past year. Three-quarters of customers in India report their trust in banks rose during 2010. In both Brazil and China, a majority of respondents say their confidence has grown or remained the same.
“In developed markets, customer confidence and trust in financial institutions has been severely damaged by the economic crisis, and our findings show that it remains under threat. Emerging
market economies have suffered less from the credit crisis and recession and so their banks have seen trust endure,” says Coyne.
“Banking customers in Australia, and around the world, are increasingly savvy, aware of the value they offer as customers and are expecting a better experience from their bank in return for their ongoing loyalty. This is about increased investment in branches, personal attention delivered across channels and combining customer insights with technology to improve offerings.”
“While we are seeing increased focus from banks in attracting new clients, our 2010 research, Retail banking in Asia Pacific (pdf, 1.4mb), points to the value in banks directing investments towards existing customers to reward and promote their loyalty. While only 6% of Australian customers reported having changed their bank, they may come to a point are where they see that making the effort to switch providers is worthwhile.”
“The successful institutions of the future will be those who offer customer-focused innovative services. Those that do will be able to differentiate their organisation and drive for growth. The keys to success will be brand management, personalised services and efficient pricing. Retail banks that can deliver all three will prosper in the highly regulated and constantly changing global financial services market.”
KEY FINDINGS OF THE GLOBAL REPORT: A New Era of Customer Expectation
Rebuilding customer confidence
Survey respondents cited several issues that continue to drive down trust levels. Macro-economic factors (53%) have had the most negative impact on customer confidence. Brand strength, which has been impacted by the confidence levels, is also cited as a key factor driving customer satisfaction worldwide. The image and reputation of an institution scored an average of 4.5 out of 6 when respondents were asked what is important for a successful banking relationship. A strong brand is particularly important in markets like India, Latin America and South Africa. In all three markets, more than half of respondents say a strong brand is a key characteristic when they choose their main bank.
Preventing customer attrition
Attrition levels are highest in Europe with 39% having changed their main bank in the past. Service quality and price are the leading factors driving customers to switch their main bank, with 48% of those planning to change banks because of service quality and 43% citing price as the main reason. Other motivating factors include product offerings, branch proximity and lack of trust. As customers continue to demand higher quality service while levels of price sensitivity and distrust increase, banks must innovate to address customers concerns and remain competitive.
Enhancing the customer experience
Finding a way to effectively deliver a personal service to customers will be a key success factor in the years ahead. While internet banking (83%), ATMs (79%) and branches (79%) are the touch-points customers are most satisfied with today, satisfaction with call centres is consistently weaker (44%).
Banks need to reconnect with their customer base by improving the customer experience across their operations. A number of banks are experimenting with new tools such as mobile banking but there is demand across all channels – including call centres and branches – for greater personalisation and attentiveness.
About the survey
At the end of 2010, EY conducted a global survey of customer behaviour in retail banking. We surveyed more than 20,500 individuals in Belgium, France, Germany, Hungary, Italy, Netherlands, Poland, Scandinavia, Spain, UK, United States, Canada, China, India, Brazil, Mexico, Chile, Colombia, Argentina, Peru, Panama, Venezuela Japan and South Africa asking them about their relationships with their banks, and specifically about their levels of satisfaction, what they are looking for from institutions, and their intentions and demands going forward.
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